UCAR to pay largest antitrust fine

CBS.MarketWatch.com

WASHINGTON (AP) -- The largest fine in antitrust history, $110 million, was agreed to Tuesday by the nation's leading producer of graphite electrodes as it admitted scheming to fix the price of the heat source for steel mini-mills.

UCAR International Inc. (UCR)
ucr
, based in Danbury, Conn., agreed to plead guilty to the charges and pay the fine, which is subject to court approval, the Justice Department announced.

The largest previous fine was $100 million paid by Archer Daniels Midland for price-fixing in the food and feed additives lysine and citric acid.

``UCAR International has agreed to pay the largest fine in antitrust history,'' said Attorney General Janet Reno.

Officials of the Justice Department's antitrust division made clear they hope to charge other electrode producers as well, with UCAR's cooperation.

The government said the international conspiracy to fix graphite electrode prices began at least as early as July 1992 and continued until June 1997. As a result, steel makers paid higher, noncompetitive prices to manufacture a wide variety of business and consumer items.

Steel mini-mills are a growing segment of the industry and now account for one-third of this country's steel production.

The UCAR fine follows quickly on the heels of an agreement in late February by another member of the conspiracy, Showa Denko Carbon Inc., the U.S. subsidiary of a Japanese company, to plead guilty and pay a $29 million fine. At the time, that was the fourth largest fine in antitrust history.

Both UCAR and Showa Denko agreed to cooperate with the continuing investigation by the Justice Department's antitrust division.

UCAR was charged in U.S. District Court in Philadelphia with violating the Sherman Act by conspiring with competitors to fix prices and allocate their market shares for graphite electrodes in the United States and abroad.

These electrodes, assembled in large columns, are used in steel furnaces at mini-mills to generate the intense heat necessary to melt and further refine scrap steel. The heat consumes the electrodes.

Total sales of graphite electrodes in this country are estimated at $500 million for 1996 and more than $1.75 billion over the course of the conspiracy charged.

UCAR manufacturers graphite electrodes at its Clarksville, Tenn., plant and sells them here and abroad.

``UCAR International has done the right thing in accepting responsibility for its illegal activity and agreeing to cooperate with the investigation, '' said Assistant Attorney General Joel I. Klein. ``Its cooperation should provide a significant boost to our efforts to charge other cartel members.''

A third company in the conspiracy, The Carbide/Graphite Group of Pittsburgh, has been given amnesty in the case by qualifying for the antitrust division's corporate leniency program.

Companies can avoid prosecution by turning themselves in for antitrust crimes which the government was unaware of, or by becoming the first conspirator to cooperate before prosecutors have enough evidence to win a court case.

The Carbide/Graphite Group ``came in very early and gave us significant help,'' said one Justice official, who requested anonymity.

UCAR and SGL Carbon AG of Weisbaden, Germany, are the two largest producers in the world. SGL Carbon Corp. of Charlotte, N.C. (SGG)
SGG, -1.44%
, a subsidiary of the German company, previously announced that government agents searched its offices in June 1997.

Using code names, UCAR and its co-conspirators held meetings in the Far East, Europe and the United States to rig the price and volume of graphite electrodes, the government charged. They agreed to increase prices, eliminate discounts and allocate the volume each competitor could sell and what region of the world market they could sell in, the government said.

They also agreed to restrict the access of non-conspiring competitors to new technology, according to the charge filed in court.

As a result, the price of graphite electrodes rose significantly during the conspiracy, outpacing inflation.

The antitrust division's criminal enforcement chief, Gary R. Spratling, said, ``During the past six months, our efforts targeting international cartels have resulted in a dozen prosecutions and yielded fines totaling nearly $230 million. We will continue to go after any U.S. or foreign firms involved in cartel activity against American businesses and consumers.''

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